Further Thoughts on Fireside Bank

We've also found two or three important implications that we may have overlooked in our initial reading of Fireside Bank.

In addition to the holding refusing to find an exception to the one-way intervention rule, and upholding class certification nonetheless, and in addition to some favorable language which could be useful to anyone moving for certification, if the facts fit, there are two other very interesting implications that could broadly affect standing requirements under the UCL, and the scope of discovery in any class action.

With respect to the UCL angle, the Supreme Court appears to have endorsed an aggrieved party's right to seek injunctive relief even if they suffered no loss of money or property, even after Proposition 64. The court wrote that the named class representative would have standing to seek injunctive relief under the unfair competition law even if she was not entitled to restitution. The court wrote that if the plaintiff could show that she was deprived of a fair opportunity to redeem the financed vehicle, "followed by an unlawful demand for payment" she would be able to proceed under the unfair competition law. We do not see a loss of money or property under those facts unless the plaintiff paid money in response to the demand. Perhaps showing a wrongful demand for money or property, or a threatened loss of money or property is enough.

Second, near the end of the opinion's discussion of the typicality analysis for class certification, the court writes:

Fireside Bank objects to inquiry into the substance of these defenses by noting our conclusion in Linder that a court, in determining class certification, should not consider the merits. (Linder v. Thrifty Oil Co., supra, 23 Cal.4th at pp. 439-443.) But there, we said only that a plaintiff need not establish a likelihood of success on the merits in order to obtain class certification. It does not follow that, in determining whether the criteria of Code of Civil Procedure section 382 are met, a trial or appellate court is precluded from considering how various claims and defenses relate and may affect the course of the litigation, considerations that may overlap the case’s merits. (See Hanon v. Dataproducts Corp., supra, 976 F.2d at p. 509 [court may consider “evidence which goes to the requirements of [Fed. Rules Civ.Proc.,] Rule 23 even though the evidence may also relate to the underlying merits of the case”].) Indeed, in Linder we expressly recognized that “whether the claims or defenses of the representative plaintiffs are typical of class claims or defenses” was an issue that might necessarily be intertwined with the merits of the case, but which a court considering certification necessarily could and should consider. (Linder, at p. 443; see Hardy v. City Optical Inc. (7th Cir. 1994) 39 F.3d 765, 770 [rejecting challenge to typicality based on arguable unique defense on basis that defense was not arguable in light of defendants’ factual concessions].)

This is the second opinion in the last year (the first being Dunbar v. Albertson's, Inc.) that appears to chip away at the long-held belief that discovery that gets into the merits of the case are out-of-bounds prior to certification in a class action. For many years, the scope of pre-certification discovery has traditionally been limited to "certification-based" issues and not "merits-based" issues if discovery on liability issues would be expensive and time-consuming. Carabini v. Superior Court (King) (1994) 26 Cal.App.4th 239, 241. However, in Dunbar, the Court of Appeal held that the party seeking class certification "must explain how [a] procedure will effectively manage the issues in question". Imposing that burden necessarily must mean that a plaintiff must have the due process right of inquiring into the facts and evidence that could be used to address that burden. That means at least some meaningful merits-based discovery. Here, the Supreme Court has expressly noted that “whether the claims or defenses of the representative plaintiffs are typical of class claims or defenses” was an issue that might necessarily be intertwined with the merits of the case, but which a court considering certification necessarily could and should consider. If the court can and should consider issues intertwined with the merits at the certification hearing, that means discovery must be permitted into such intertwining issues prior to the certification motion being filed.

Finally, Fireside Bank does away with the argument that a class action might not be superior to the simpler alternative of a non-class action representative action under Business & Professions Code S 17200. After Proposition 64, there is no longer any such beast under California law. [Hat tip to the UCL Practitioner.]

Comments

I'd gladly trade away restrictions on merits discovery for a requirement that the plaintiff explain, with specificity, the form the trial will take and how it will be tried using collective proof. Plaintiffs often just provide airy generalities about representative testimony and statistics, and that is often enough (or was pre-Dunbar) to carry the day.